Free-to-Air Channel Promises Success for Disney in Russia

Article  by  Dovilé DAVELUY  •  Published 09.11.2011  •  Updated 10.11.2011
[NEWS] After three years of negotiations, the Walt Disney Company has finally secured a deal with Russian media group UTH to launch a free national TV channel in Russia.

At the end of October 2011, the Russian media group UTH struck a deal with the Walt Disney Company, now providing its content free of charge to Russian audiences. According to the Russian Information Agency ITAR-TASS, this partnership will allow Disney to acquire 49% of Seven TV, a broadcast channel that reaches 40 million households and approximately 75% of Russian television audiences. Seven TV will remain majority owned by UTH Russia. When it goes on air in early 2012, the rebranded Seven TV will change its name to the Disney Channel and will start broadcasting Disney’s children and family-oriented programs, as well as content created in Russia. The Disney Channel will be available in 54 major Russian towns, including Moscow and Saint Petersburg.
Logo for Russian Media Group UTH, Takoshel/ Wikimedia Commons

The New York Times
noted that the deal remains small in financial terms – about $300 million – but represents “a big step forward for Disney’s ambitions in the country.” Robert A. Iger, Disney’s chief executive, claimed in a press release that the company was “excited about increasing Disney Channel’s presence in Russia and delivering exceptional family entertainment to this important growth market.” The Disney Channel will be only the second nationally broadcast foreign channel after MTV in a largely untapped Russian entertainment market.
Dave Hollis, Disney’s executive vice-president for theatrical exhibition sales and distribution, is convinced that “Russia’s growth has outpaced established markets and emerging markets like China.” Box office revenues in the country have been increasing at an annual rate of 27% since 2006, the Russian investment bank Renaissance Capital reports. The growth of ticket sales for Disney movies in Russia is a good indicator that it represents a huge profit-making opportunity for the company. The latest “Pirates of the Caribbean: On Stranger Tide” brought in $64 million, more than doubling the profit from the 2007 “Pirates of the Caribbean: At World’s End,” which totaled $30 million.

By August 2010, Disney had introduced its cable channel in Russia. Its pay-TV service has grown steadily in popularity. The Russian daily Kommersant reports that from July to September 2011 Disney’s cable channel drew an average daily urban audience of 3%, ranking seventh among all monitored cable and satellite channels in the country. Marina Jigalova-Ozkan, managing director of the Walt Disney Company in Russia, regards the popularity of the cable channel as a positive sign predicting the future success of the national channel.
Russian players seem to be equally convinced of Disney’s future success in their country. Ivan Tavrin, CEO of UTH Russia, confirmed that “the superb infrastructure and technical foundation of UTH in combination with Disney’s unique brand and global expertise, will deliver excellent results for the Disney Channel in Russia.” In his meeting with Robert Iger, Russian Prime Minister Vladimir Putin said that he hoped the partnership “will be useful from a business point of view and will be a positive start on the media market.”
Disney’s move towards a free-to-air channel in Russia seems to signal a significant move forward in the company’s foreign expansion strategy. While it mostly relies on pay-TV service to distribute its programming around the world, Disney introduced its first free-to-air channel in Spain in 2008, and recently launched another free Disney Channel in Turkey. In regards to Turkey, the company said it was evaluating countries on a case-by-case basis and had not abandoned distribution of the Disney Channel on pay-TV. Disney has not specified how the introduction of the free channel into the Russian market will affect its cable operations in the country.

The current deal is not Disney’s first attempt to break into a promising Russian market. In 2008, the company had announced a tentative partnership with another Russian media company, Media-One Holdings Limited, but then failed to secure the regulatory approval from Russian government authorities for the deal to go through. The New York Times concludes that it remains unclear why the Russian government decided to approve the deal this time, but suggests that “with oil revenue projected to decline over the next decade, the country in general is far more eager to attract foreign investment.” According to ITAR-TASS, the current deal makes the Walt Disney Company the third biggest foreign investor in Russia’s broadcasting market, after Sweden’s Modern Times Group and Luxembourg’s RTL Group.

Photo credits: architekt2; Flickr/ web-superhero; Flickr

Would you like to add or correct something? Contact the editorial staff